|(in millions of $)||FY2019 Enacted||FY2020 Enacted||FY2021 Request|
|Total Compact Assistance||637.4||634.5||543.0|
|Office of the Inspector General||4.5||4.5||4.5|
Introduction and Summary
The Millennium Challenge Corporation (MCC) requests $800 million for Fiscal Year (FY) 2021 to support compact programs in development, including a second compact program with Malawi and the first concurrent compacts for regional integration with Benin and Niger, as well as new threshold programs.
MCC’s work reflects a model built on lessons learned through 15 years of experience in implementing development projects. In FY 2021, MCC will build on its model to find new, innovative ways to achieve a greater impact across its portfolio. To do this, MCC will focus on four organizational priorities: (1) empowering MCC staff for optimal performance; (2) establishing a culture of creativity that encourages smart risk; (3) crowding-in and enabling private investment; and (4) holding the agency and partner countries accountable. Focusing on these four areas will empower MCC to expand impact and continue to deliver on its singular mission to reduce poverty through economic growth.
MCC’s focus on transparency and accountability for results continues to be recognized. In November 2019, Results for America released the 2019 Invest in What Works Federal Standard of Excellence index, an annual scorecard of how federal agencies are using evidence and data to achieve better results. For the fourth consecutive year, MCC received the highest score of all federal agencies featured in the report for having built the infrastructure necessary to be able to use data, evidence, and evaluation in budget, policy, and management decisions.
The FY 2021 budget request supports the following activities:
- Continued development of compact programs with Burkina Faso, Tunisia, Lesotho, Timor-Leste, Kosovo, Indonesia, Malawi, and Mozambique.
- Development of MCC’s first concurrent compacts for regional integration with Benin and Niger to enhance cross-border transport. The Concurrent Compacts for Regional Integration section outlines the potential compacts.
- Maintain MCC’s rigorous oversight model, including review of compact and threshold programs and adjusting plans, modifying activities, or eliminating programs or activities when deemed appropriate through regular monitoring mechanisms and oversight by MCC’s Board of Directors.
- Manage the annual process of selecting countries to begin developing compact and threshold programs. MCC’s competitive selection process is a data-driven, transparent method for determining how the agency uses its development dollars. To be considered for MCC funding, countries must first pass MCC’s scorecard, which brings together 20 independent, third-party indicators that measure a country’s policy performance in the areas of economic freedom, investing in its people, and ruling justly. The MCC scorecard represents one of many ways the agency is unique in how it works to reduce poverty through economic growth around the world.
- Maintain the momentum on streamlining and improving upon the compact and threshold development process to leverage efficiencies and reduce timelines while maintaining and improving the quality of MCC’s programs.
- Use MCC’s unique evidence-based and rigorous approach to developing projects and assessing their impact.
- Develop and implement blended finance strategies throughout the life cycle of our programs to leverage private and public resources that will bring greater development impacts to partner countries. In particular, MCC will continue to create an enabling environment for private investment and private enterprise in partner countries through critical public policy reforms and institutional capacity building. MCC will continue to collaborate with the private sector in the design, implementation, and sustainability of compact and threshold programs and seek co-financing opportunities and private dollar investments that leverage resources from MCC and from partner country governments for potential public-private partnerships. The Mobilizing Private Investment section outlines some examples of potential opportunities that may exist within MCC’s current portfolio of programs.
- Continue the successful implementation of the Star Report, a business process developed to streamline burdensome reporting requirements by MCC’s country teams and consolidate existing programmatic information into a single, comprehensive document. The Star Report collects critical information throughout the lifecycle of each compact and threshold program covering topics such as performance, sustainability, and lessons learned. This report serves as a core document of record for the agency and as a go-to accountability resource for Congress and external stakeholders after a program is completed.
- Establish and implement a strong and dynamic knowledge management system, business practices, and tools to systematically share and deploy learning and results internally, externally, and with our partner countries, with the goal of improving efficiency and efficacy in the development and implementation of country programs.
Concurrent Compacts for Regional Integration
In December 2019, MCC’s Board of Directors again selected four partner countries in West Africa—Benin, Burkina Faso, Côte d’Ivoire, and Niger—to explore opportunities to support cross-border collaboration, increase regional trade, and enhance regional economic integration. MCC has been working with each of these partner countries to identify and assess projects that have strong support within the relevant countries and otherwise meet MCC’s stringent compact approval criteria. MCC requests funding to support the first opportunity, a regional transport project with Benin and Niger, in this FY 2021 budget request.
Women’s Global Development and Prosperity Initiative
Gender analysis informs all aspects of MCC’s work, from the selection of country partners and early analysis, to program design and implementation, and through its monitoring and evaluation plans. Each country partner is required to develop and implement a Social and Gender Integration Plan, which provides a comprehensive roadmap for improving social inclusion and gender integration throughout MCC-funded compact and threshold programs.
MCC has also been actively involved in the design and implementation of the Trump Administration’s Women’s Global Development and Prosperity initiative (W-GDP). Advancing women’s economic opportunities is fundamental to achieving MCC’s mission to reduce poverty through economic growth. MCC actively works to advance women’s economic opportunities in partner countries across all three pillars of W-GDP.
For example, in Morocco and Côte d’Ivoire, MCC is supporting technical and vocational education and training (TVET) centers that will train women and men in skills in demand by the private sector and provide career counseling to connect them with private firms that seek their expertise. MCC’s recently closed compact in Georgia provided competitive grants for TVET programs that developed, tested, and disseminated innovative approaches to employment-oriented skills. These grants, which included $5.7 million in co-investment from the private sector, supported social and gender integration planning to ensure that girls and women have equal access to career development and training within a safe and welcoming learning environment. Also in Morocco, MCC is piloting a “Results-Based Financing Jobs Fund,” an innovative approach that provides incentives to providers to place women and at risk youth in jobs.
MCC’s threshold program in Kosovo is encouraging female employment in the energy sector by providing scholarships for technical degrees and by placing women in internships at energy firms and institutions. And, in Benin, MCC is training women entrepreneurs so that they can capitalize on new business opportunities with the extension of grid and off grid energy.
Women often face legal or policy barriers that prevent them from fully benefitting from the economic opportunities generated by growth. MCC works with governments to identify and address the most critical legal barriers to women’s economic participation and to strengthen policies and operations within the central and local governments. In Morocco, where MCC is supporting land reform, the government recently amended laws that govern the structure and administration of communal land and strengthen secure land rights for women. In Côte d’Ivoire, the government launched a new gender unit within the Ivoirian Ministry of National Education which is tasked with developing a new Gender in Education policy to improve education and skills training for girls and women.
U.S. Market Outreach
MCC engages with the private sector throughout the lifecycle of its compact and threshold programs. This engagement begins with program development, starting from the initial analyses that MCC undertakes with partner countries in the nascent phases of program development through to the evaluations after compact and threshold programs end. MCC works to create an attractive business environment and encourages private sector firms to invest alongside its compact programs.
MCC finances two types of procurements, those directly administered by MCC and those administered by an accountable entity in a partner country with MCC oversight. MCC-funded contracts, grants, and cooperative agreements are awarded through open, fair, and transparent procedures, including the evaluation processes. In such an environment, especially in the context of best value procurement, U.S. firms have been more successful than their foreign competitors in recent years.
MCC is engaging prospective U.S. bidders in its procurements and increasing awareness among U.S. firms of opportunities in MCC-financed programs. Through collaboration with the Department of Commerce, the U.S. Trade and Development Agency (USTDA), World Bank, U.S. Chamber of Commerce, and others, MCC launched the “Work With Us” portion of its website as a one-stop shop for all agency-funded business and partnership opportunities. Additionally, MCC hosts regular market outreach events, publishes a 12-month forecast that is updated quarterly, and meets with U.S. firms that are either doing business in MCC partner countries or are interested in exploring these opportunities.
Most recently, MCC implemented a detailed market outreach plan to inform, attract, and further encourage U.S. firms to work with MCC. The market outreach plan includes the promotion of MCC partner country procurements to U.S. businesses, highlighting the advantages of working on MCC-funded projects while simultaneously addressing barriers to participation and building additional avenues for partnership with MCC through co-financing, joint research, knowledge sharing, and program co-design.
Mobilizing Private Investment
MCC’s development model includes mobilization of private investment as a key development tool. After a country is selected for MCC investment, MCC conducts an analysis of opportunities for increasing private sector investment. Programs are designed to catalyze private and commercial finance, while MCC works to assist partner countries in strengthening financial markets to support sustainable development and economic growth. Because strategic, long-term capital support is key to achieving lasting results from programs, MCC will continue to attract private and commercial finance in and around our compacts, while also improving leverage ratios. The current MCC blended-finance portfolio offers examples of how MCC employs grant facilities, public-private partnerships, and catalytic financing strategies to increase the impact and sustainability of programs.
Morocco: The Industrial Land Activity optimizes the way the government brings industrial land to market, shifting from a state- to a market-driven approach. A $30 million grant facility, the Fund for Sustainable Industrial Zones (FONZID), launched in March 2019 will incentivize private sector development and revitalization of industrial land.
Morocco: Three industrial zone demonstration sites in the region of Casablanca-Settat, which will use public-private partnership (PPPs) models, are coming to market in 2020. The sites are expected to create a new cadre of industrial land developers that will increase the availability of industrial space for SMEs. The PPPs are expected to catalyze $25 million in capital investments by the private sector.
Côte d’Ivoire: MCC is supporting the development of a logistics center PPP for cargo movements through the Port of Abidjan. The center will provide pre-gate truck parking facilities, a logistics platform, and ancillary services to help reduce congestion in Abidjan and increase efficiency of container traffic through the Port. MCC is collaborating with USTDA to organize a reverse trade mission to bring an Ivorian delegation to the United States to visit ports with successful approaches for truck parking and logistics, and to meet with U.S. companies that specialize in logistics and fleet management technologies.
Benin: The Off-Grid Clean Energy Facility (OCEF) has attracted the interest of U.S. companies with innovative business models and technologies by providing competitive, matching grants to fund critical off-grid energy projects and energy efficiency measures. From a first call for proposals, a set of co-financing agreements for businesses providing solar home systems has been submitted to the national regulator for approval. A second call focused on mini-grid operators is underpinned by the government’s adoption of an off-grid electrification policy. This second call is currently in the proposal evaluation phase. The OCEF has also concluded a letter of agreement with a blended finance debt facility anchored by the African Development Bank, further attracting capital in and around MCC’s work in Benin.
Benin: MCC’s largest solar generation project to date has attracted the interest of U.S. companies. The transaction will be structured as an independent power producer (IPP), with the government of Benin recently approving a national IPP framework. A transaction advisor is supporting the tender process that is underway for four plants totaling at least 45 megawatts.
El Salvador: MCC’s compact is helping the Government of El Salvador to develop and bring to market up to six public private partnerships that will attract up to $250 million of private investment. The government has brought two of these PPPs for a cargo terminal and street lighting to market, and is conducting feasibility studies on the remaining four projects.
Catalytic and Co-Financing
Kosovo: As part of the Kosovo Threshold Program, MCC developed a partnership with the Government of Kosovo and the Kosovo Credit Guarantee Fund to unlock commercial financing for renewable energy projects. MCC will fund technical assistance to the Kosovo Credit Guarantee Fund and help build its capacity to provide renewable energy guarantees, with the aim of spurring investment in Kosovo’s renewable energy sector. MCC’s funding complements contributions from other donors and development finance institutions. The program will help unlock project financing that is needed to deliver up to 25 megawatts of renewable energy projects for Kosovo, addressing the lack of reliable electricity.
El Salvador: The El Salvador Investment Challenge facility has catalyzed up to $150 million of private investment by funding $75 million of public works that these private investments need to be viable (a leverage ratio of 2:1). These nine investments span from technical assistance and capacity building to infrastructure for water and roads.
Use of these blended finance models helps attract private dollars and bring a multitude of actors into the development space, promoting sustainable impact and longevity of MCC projects. By employing these mechanisms, MCC aims to increase the agency’s effectiveness, as well as expand understanding of how blended finance can close the gap between government resources, development funding, and the growing needs of the developing world.
The passage of the Better Utilization of Investments Leading to Development (BUILD) Act of 2018 and the establishment of the new United States International Development Finance Corporation (DFC) have opened opportunities for U.S. leadership in development finance, as well as promoting interagency alignment on U.S. foreign policy goals. MCC participates on the DFC’s Development Finance Coordination Group, providing strategic insights grounded in 15 years of agency practice and learning. MCC also works with the DFC at the operational level, sharing the analytical products of MCC’s rigorous, evidence-driven approach to economic analysis and independent evaluation, such as MCC’s constraints to economic growth analysis. In FY 2021, MCC will also coordinate closely with the DFC to identify co-financing opportunities where MCC financing can enable the DFC to increase the scale and impact of its investments. Robust interagency collaboration with the DFC and across U.S. foreign assistance agencies will provide the United States with development finance capabilities required to maintain and achieve global leadership among international donors.